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Here's Why You Should Hold Onto Cerner (CERN) Stock for Now

Zacks Equity Research

Cerner Corporation CERN is expected to gain from positive developments and a strong guidance. However, softness in Technology Resale, Support and Maintenance and Reimbursed Travel units raises concern.

Price Performance

Over the past year, shares of the Zacks Rank #3 (Hold) company have rallied 6.8% against the industry’s 10.1% decline.

For the trailing four quarters, Cerner has a positive average earnings surprise of 0.8%.

Let’s take a look at the factors that are currently favoring Cerner.

What’s Working for the Stock?

Strong View
For the third quarter of 2019, Cerner expects revenues between $1.41 billion and $1.46 billion. The mid-point of this range indicates growth of 7% from the prior-year quarter.

Adjusted earnings per share are anticipated between 65 cents and 67 cents. The mid-point of this range is 5% higher year over year.

Bookings are anticipated in the band of $1.50-$1.70 billion. The mid-point of this range indicates year-over-year improvement of 1% from the third quarter of 2018.

Cerner kept its 2019 revenue guidance intact. The company continues to expect revenues between $5.65 billion and $5.85 billion, the mid-point of which represents growth of 7% over 2018.

Cerner reiterated the 2019 earnings per share outlook as well. The company continues to project earnings of $2.64-$2.72, which indicates a rise of 9% at the mid-point.

Encouraging Developments

The company recently collaborated with GetWellNetwork, a global consumer health technology company, with a view to bridge the gap between providers and patients in inpatient and outpatient settings.

Last month, Cerner announced the development of the Cerner Learning Health Network to help clinicians gain health insights. Notably, the company has collaborated with the Duke Clinical Research Institute to pilot the initiative.

Deterrents

Cerner’s Technology Resale, Support and Maintenance and Reimbursed Travel segments have been seeing softness of late.

Technology resale revenues dropped 19.3% on a year-over-year basis, while Support and maintenance revenues were down 0.9%. Also, Reimbursed travel revenues reflected a decline of 4.9% year over year.

That’s not all. The company also witnessed a drop in long-term bookings.

Cerner Corporation Price and Consensus

 

Cerner Corporation Price and Consensus

Cerner Corporation price-consensus-chart | Cerner Corporation Quote

Which Way Are Estimates Treading?

For the third quarter, the Zacks Consensus Estimate for Cerner’s earnings per share is pegged at 65 cents, suggesting year-over-year growth of 3.2%. The same for revenues stands at $1.43 billion, indicating a year-over-year increase of 6.8%.

For 2019, the Zacks Consensus Estimate for Cerner’s earnings per share is pinned at $2.68, suggesting 9.4% growth, while the same for revenues stands at $5.73 billion, calling for a 6.8% rise.

Key Picks

A few better-ranked stocks in the broader medical sector are Varian Medical VAR, CONMED Corporation CNMD and Masimo Corporation MASI, each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Varian’s long-term earnings are expected to grow 8%.

CONMED’s long-term earnings are projected to increase 12.8%.

Masimo’s long-term earnings are estimated to rise 20.5%.

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Cerner Corporation (CERN) : Free Stock Analysis Report
 
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